| | | | |  | | By Kate Davidson and Aubree Eliza Weaver | Presented by Sallie Mae® | Editor's note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro. Treasury Secretary Janet Yellen is in Asia this week to sell the Group of 20 finance ministers on an untested and some say a risky plan that, if successful, could grind the Russian war machine to a halt and bring global energy prices back to earth. U.S. officials also see the proposal for an oil price cap as essential for avoiding a disastrous supply shock that could trigger a worldwide recession when restrictions on Russian oil exports take effect at the end of the year. Skeptics say the plan will be hard to enforce and easy to evade, and worry Putin will retaliate by taking all his oil and going home. From your MM host: "The push for a price cap is a critical diplomatic test for Yellen, who is making her first trip to Asia as Treasury secretary, including stops in Japan and South Korea. … If successful, the cap could help dampen the impact of the war on energy prices, while also denying Russia access to revenue for its military, a senior Treasury official told reporters before Yellen's trip. 'The more we talk to different countries about it, the more they understand the concept we're putting forward and understand the rationale,' the official said."
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U.S. Treasury Secretary Janet Yellen, right, and Japan's Finance Minister Shunichi Suzuki shake hands during their meeting at the finance ministry in Tokyo, Tuesday, July 12, 2022. | Yuri Kageyama/AP Photo | What is the rationale? We filled you in last month on some of the thinking behind the idea, which Treasury officials have been quietly working on for months. The short version: Vladimir Putin has continued to rake in millions each day from sales of Russian oil. Europe is set to implement new restrictions that would limit Russia's seaborne oil exports. But U.S. officials worry that would lead to a plunge in world supply that could send oil prices soaring. Their alternative: allow an exception from the European sanctions for importers who agree to buy Russian oil at a heavily discounted price. Will it work? We've talked to very smart people on both sides of this debate. The biggest question, as Gerard DiPippo sees it, is how Putin responds to this show of force. Even a modest reduction in Russia's oil production could wreak havoc on energy markets. It might not be a logical decision, but as DiPippo notes, making sound decisions is not exactly what Putin's known for. "His calculus, his ideal, is to break the Western coalition, and energy prices are his best hope for doing that," he said. "Russia's ability to call our bluff on this I think is pretty obvious, and it's risky." Robin Brooks, chief economist at the Institute of International Finance, thinks the plan would be effective and said it's unlikely Putin would shut down Russia's production completely. But he sees little upside to continuing the status quo, even if it means grappling with a temporary price spike. "What we're debating is, 'how much pain for how long?'" he said. IT'S WEDNESDAY — Inflation has given "Depression recipes" new life, WSJ's Josh Jamerson reports . My personal favorite is my Great Grandma Condon's Ritz Cracker pie, a Thanksgiving staple in our house. (A sleeve of Ritz crackers, egg whites and a whole lotta sugar can go a long way!) Send us your best old and/or thrifty recipes, and of course your tips and story ideas: kdavidson@politico.com, aweaver@politico.com, or @katedavidson or @aubreeeweaver.
| | A message from Sallie Mae®: Now, more than ever, students and families need help making informed decisions about planning and paying for college. Sallie Mae helps by offering free tools to help all students and families calculate college costs, evaluate financial aid offers, and discover and apply for scholarships. In fact, our scholarship search tool helped more than 24,000 students cover $67 million in college costs in 2020. At Sallie Mae, being responsible goes beyond responsible lending. That's why Sallie Mae makes sense. | | | | | | Consumer price data released at 8:30 a.m. … House Financial Services subcommittee hearing on the Community Reinvestment Act proposed rule at 10 a.m. … Monthly Treasury budget figures released at 2 p.m. CPI DATA DUE OUT THIS MORNING — From Bloomberg's Olivia Rockeman: "The consumer price index probably increased 8.8% from a year earlier, marking the largest jump since 1981, according to the median forecast in a Bloomberg survey. Compared to May, the widely followed gauge is seen climbing 1.1%, marking the third month in the last four that inflation has advanced at least 1%." INTRAFI SURVEY — Community bankers do not have much confidence in the Fed. That's according to the results of a new survey from IntraFi Network of nearly 400 small bank CEOs, presidents and other c-suite executives. The quarterly Bank Executive Business Outlook survey, conducted at the end of June, found 61 percent of bankers said they were worried the Fed would "overcorrect for inflation" and raise rates too high and too fast, up from 52 percent who said the same thing in the previous survey. Nearly half (48 percent) said they expect a recession to occur by the end of the year, and another 48 percent expect we'll be in one next year. The full survey results will be released later this month. MCCONNELL GETS GOP BACKUP IN HIS MOVE TO SNARL US-CHINA BILL — Our Andrew Desiderio and Sarah Ferris: "Senate Republicans are lining up to back Minority Leader Mitch McConnell as he threatens to tank multi-billion-dollar legislation aimed at confronting China, imperiling what initially appeared on track to join this Congress' biggest bipartisan achievements. "McConnell's threat, sent via tweet while senators were away from Washington, was aimed at derailing Democrats' fledgling efforts to revive their party-line tax and climate bill, which all Republicans are expected to oppose. Although the Kentucky Republican supported the U.S.-China competition bill, known by some as USICA, he's now vowing to block it if Democrats move forward with their separate legislation." TREASURY OPENS PUBLIC COMMENT ON KEY CRYPTO REPORT — Our Sam Sutton: "The Treasury Department is requesting public input on a pending report that will cover the pros and cons of digital asset adoption, kicking off work on a key document ordered by President Joe Biden through his crypto executive order earlier this year. "For consumers, digital assets may present potential benefits, such as faster payments, as well as potential risks, including risks related to frauds and scams," Undersecretary of the Treasury for Domestic Finance Nellie Liang said." TREASURY NOMINEE PRESSED ON GLOBAL TAX DEAL, CHINA TARIFFS, INFLATION — WSJ's Amara Omeokwe: "Senators pressed Jay Shambaugh , President Biden's pick to serve as the Treasury Department's top economic diplomat, about the administration's efforts to overhaul the global tax system, elevated inflation and U.S.-China relations at a confirmation hearing Tuesday."
| | | CRYPTO'S STINKING LOW TIDE – Sam Sutton: With crypto markets reeling, the Commodity Futures Trading Commission is ramping up its investigation of digital asset businesses that may have engaged in fraud or manipulation to pump up their balance sheets, Commissioner Christy Goldsmith Romero said in an interview. "When the tide goes out, that's when you start to see entities that have been engaged in fraud," said Romero, a former federal investigator tasked with investigating frauds connected to the Troubled Asset Relief Program. "There's nothing really to pad it or cover it." CFTC Chair Rostin Behnam has been angling to secure the power and funding to bring major crypto exchanges and brokerages under the CFTC's direct oversight. The financial derivatives regulator's existing authorities are limited to rooting out fraud and manipulation in digital asset markets. Behnam previously said he expected tips on alleged scams to surge in the aftermath of high-profile crypto blow-ups — a prediction that Romero said has come true. "We are heavily investigating a number of companies and a number of situations here in the industry," Romero said. "We've come out with a number of enforcement actions just recently, but we are opening up more investigations."
| | | HOUSING COULD PROVIDE MORE FUEL FOR INFLATION — WSJ's Nick Timiraos: "Climbing housing costs are set to keep inflation elevated this year , creating another challenge for Federal Reserve officials who want to see signs that price pressures are easing before slowing their interest-rate increases. Overall annual inflation rose to 8.6 percent in May, while core inflation, which excludes volatile food and energy costs, hit 6 percent, according to the Labor Department's consumer-price index."
| | | | A message from Sallie Mae®:   | | | | | | Mark Calabria, the former Federal Housing Finance Agency director, has joined the advisory board of Evolve Mortgage Services, the company announced Tuesday. Calabria, whom Biden removed from the FHFA director job in June 2021, will serve a one-year term on the board. Diane Ellis has joined IntraFi as a senior managing director. Ellis served most recently as director of the division of insurance and research at the Federal Deposit Insurance Corp., where she spent 34 years before retiring in May.
| | | | INTRODUCING POWER SWITCH: The energy landscape is profoundly transforming. Power Switch is a daily newsletter that unlocks the most important stories driving the energy sector and the political forces shaping critical decisions about your energy future, from production to storage, distribution to consumption. Don't miss out on Power Switch, your guide to the politics of energy transformation in America and around the world. SUBSCRIBE TODAY. | | | | | | | | IMF CHIEF WARNS OF DEBT CRISIS — Bloomberg's Eric Martin: "International Monetary Fund Managing Director Kristalina Georgieva warned of a global debt crisis in the making as central banks raise interest rates to curb inflation, increasing debt-servicing costs for vulnerable nations. 'What we see now is a crisis upon a crisis, and possibly a third shock of tightening of financial conditions to come after the pandemic and on top of the war' in Ukraine, Georgieva said at an event hosted by Devex in Washington Tuesday." —The IMF also cut its growth projections for the U.S. economy this year and next, and raised its unemployment-rate estimates through 2025, Bloomberg's Ana Monteiro wrote. The biggest U.S. banks are poised to report a double-digit increase in trading, the result of big market swings spurred by recession fears, soaring inflation and global turmoil, including Russia's invasion of Ukraine. — Bloomberg's Hannah Levitt and Shubham Saharan Investors are giving the shares of dividend-paying companies a second look as they seek to buttress their portfolios against surging inflation and sharp declines in asset prices. — Reuters' David Randall
| | A message from Sallie Mae®: At Sallie Mae, we want students and families to make responsible choices when it comes to planning and paying for college. That's why we offer free tools and resources to help calculate college costs, evaluate financial aid offers, plus discover and apply for scholarships. We also reward our customers who make payments while in school. More than half choose to do just that, saving them money in the long run and setting them up for financial success. That's why Sallie Mae makes sense. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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